H 1 2 0 2 1

FINANCIAL REPORT

SPHERA FRANCHISE GROUP SA

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TABLE OF CONTENTS

ISSUER INFORMATION ______3

FINANCIAL RESULTS HIGHLIGHTS ______4

H1 2021 RESULTS ANALYSIS ______5

MAIN FINANCIAL RATIOS ______9

SIGNIFICANT EVENTS IN Q2 2021 ______10

SIGNIFICANT EVENTS AFTER CLOSING OF THE REPORTING PERIOD ____ 11

ABOUT SPHERA FRANCHISE GROUP ______12

RISKS AND EXPECTATIONS REGARDING H2 2021 ______14

DECLARATION FROM THE MANAGEMENT ______17

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE SIX-MONTHS PERIOD ENDED 30 JUNE 2021 (UNAUDITED)____ 18

INTERIM CONDENSED SEPARATE FINANCIAL STATEMENTS AS AT AND FOR THE SIX-MONTHS PERIOD ENDED 30 JUNE 2021 (UNAUDITED)______35

The interim condensed consolidated financial statements and the interim condensed separate financial statements presented on the following pages are prepared in accordance with International Financial Reporting Standards, as adopted by European Union (“IFRS”).

The interim condensed consolidated financial statements and the interim condensed separate financial statements as of June 30th, 2021, are unaudited.

The financial figures presented in the descriptive part of the report that are expressed in million RON are rounded off to the nearest integer. This may result in small reconciliation differences.

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ISSUER INFORMATION

INFORMATION ABOUT THIS FINANCIAL REPORT

Type of report Half-year report for H1 2021

For financial period 01.01.2021 – 30.06.2021

Date of publishing 31.08.2021

According to Annex 14 of ASF Regulation 5/2018

ISSUER INFORMATION

Issuer’s name Sphera Franchise Group S.A.

Fiscal code RO 37586457

Trade registry number J40/7126/2017

Registered office Calea Dorobanților nr. 239, 2nd floor, Bucharest sector 1

INFORMATION ABOUT FINANCIAL INSTRUMENTS

Subscribed and paid-up share capital RON 581,990,100

Bucharest Stock Exchange, Main Segment, Premium Market on which the securities are traded Category

Total number of shares 38,799,340

Symbol SFG

CONTACT DETAILS FOR INVESTORS

Phone / Fax +40 21 201 17 57 / +40 21 201 17 59

E-mail [email protected]

Website www.spheragroup.com

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FINANCIAL RESULTS HIGHLIGHTS

Sales per geography

Sales per brand

119% 994% 137%

increase in topline in Q2 2021 vs increase in normalized EBITDA Increase in net profit Q2 2021 Q2 2020 in Q2 2021 vs Q2 2020 vs Q2 2020

#1 103% 161 the best Q2 in history in terms of KFC, Pizza Hut and Taco Bell Increase in like-for-like sales in all-store performance for Taco Bell restaurants on all 3 markets as Q2 2021 vs Q2 2020 and KFC on all 3 markets of 30.06.2021

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H1 2021 RESULTS ANALYSIS1

After a long period of instability caused by the novel coronavirus pandemic, Sphera Franchise Group closed Q2 2021 with record-high results and the best second quarter in the company’s history, registering RON 233.1 million in consolidated sales on all three markets of activity, a surge of 119% compared to the same period of last year. Despite ongoing lockdowns and limitations on the indoor dining, KFC stores present in Romania, Italy and Republic of Moldova as well as Taco Bell in Romania thrived between April and June 2021, registering the best sales for that period of the year. Combined with a strong first quarter of the year, Sphera Franchise Group closed H1 2021 with consolidated sales of RON 444.5 million, a 46% increase compared with H1 2020, normalized EBITDA of RON 30.7 million (+1,867%) and a net profit of RON 5.2 million (+123%).

In the first six months of 2021, restaurant expenses grew at a slower pace than the topline, reaching RON 408.7 million, a 37% increase compared to H1 2020. Food and material costs grew by 42%, reaching RON 143.5 million; the increase that was primarily volume driven. Moreover, the Group registered a 43% increase in payroll and employee benefits, mainly due to the uptake in store activity in Q2 2021 as compared to Q2 2020 and limited state aid measures. Rent costs registered a tempered increase of 16%, reaching RON 34 million as the Group continued renegotiations in Italy, Republic of Moldova as well as for Pizza Hut locations in Romania. Royalties, directly related to the topline, grew 48% reaching RON 26.5 million while advertising increased by 39%, up to RON 20.1 million. Depreciation and amortization, reaching RON 18 million was in line with H1 2020. Other operating expenses increased by 39%, reaching RON 64.4 million, driven by a 63% increase in third-party expenses (mainly due to increase in aggregators volume, resulting in a 148% cost increase YOY, representing 58% of third-party expenses in H1 2021, a 20pp increase compared to a share of 38% registered in H1 2020), 50% increase in maintenance and repairs and 14% increase in utilities costs.

In the first six months of 2021, the restaurants of the Group registered operating profit of RON 35.8 million, a 437% increase compared to the same period of last year. The G&A expenses grew slightly in this period, by 4%, reaching RON 25.4 million. Consequently, the Group recorded a 159% increase in operating profit, reaching RON 10.4 million. EBITDA grew a staggering 3,785% to RON 30 million, with EBITDA margin increasing with more than 6pp, reaching 7%. Normalized EBITDA reached RON 30.7 million, with normalized EBITDA margin of 7%. Finance costs increased by 22% (mainly due to postponement of principal repayment for bank loans), therefore the Group posted gross profit of RON 6.9 million (+134% YOY). The Group closed H1 2021 with a net profit of RON 5.2 million, a 123% increase compared to H1 2020.

1 As of January 1st, 2019, Sphera Franchise Group applies IFRS 16 “Leases” standard that sets out the principles for the recognition, measurement, presentation, and disclosure of leases. When analyzing the performance of the Group, the management’s focus is on the financial results that exclude the impact of IFRS 16. Therefore, the basis for the financial analysis on the following pages are the results excluding IFRS 16. Nonetheless, for most of the tables below are provided financial results both including, as well as excluding the impact of IFRS 16. For more information on the impact of IFRS 16 Leases on the interim condensed consolidated financial statements of Sphera, please refer to the Interim Condensed Consolidated Financial Statements.

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Summary of interim Consolidated Financial Statements for H1 (results excluding IFRS16 impact): Y/Y % % of Sales Data in RON’000 H1-21 H1-20 H1-21/H1-20 H1-21 H1-20 Δ% Restaurant sales 444,544 304,580 46.0% Restaurant expenses 408,708 297,903 37.2% 91.9% 97.8% -5.9pp Food and material 143,535 100,793 42.4% 32.3% 33.1% -0.8pp Payroll and employee benefits 102,197 71,315 43.3% 23.0% 23.4% -0.4pp Rent 33,950 29,295 15.9% 7.6% 9.6% -2.0pp Royalties 26,489 17,884 48.1% 6.0% 5.9% 0.1pp Advertising 20,087 14,429 39.2% 4.5% 4.7% -0.2pp Other operating expenses, net 64,438 46,414 38.8% 14.5% 15.2% -0.7pp Depreciation and amortization 18,012 17,773 1.3% 4.1% 5.8% -1.8pp Restaurant operating profit 35,835 6,677 436.7% 8.1% 2.2% 5.9pp General & Admin expenses, net 25,420 24,447 4.0% 5.7% 8.0% -2.3pp Operating Profit/(Loss) 10,415 (17,771) 158.6% 2.3% -5.8% 8.2pp Finance costs 3,534 2,902 21.8% 0.8% 1.0% -0.2pp Finance income 42 88 -52.1% 0.0% 0.0% 0.0pp Profit/(Loss) before tax 6,924 -20,585 133.6% 1.6% -6.8% 8.3pp Income tax expense 559 796 -29.8% 0.1% 0.3% -0.2pp Specific Tax 1,179 978 20.5% 0.3% 0.3% -0.0pp Profit/(Loss) for the period 5,185 (22,360) 123.2% 1.2% -7.3% 8.5pp EBITDA 30,006 772 3,785.4% 6.7% 0.3% 6.5pp Normalized EBITDA* 30,740 1,563 1,866.7% 6.9% 0.5% 6.4pp (*) For the 6M period ended June 30th, 2021, EBITDA was normalized to exclude the accrued penalties due to Pizza Hut Europe (Master Franchisor) for the restaurants committed to be opened in 2019 and postponed for the future periods.

Summary of interim Consolidated Financial Statements for H1 – results and evolution presented with and without IFRS16 impact H1-21 H1-21 H1-20 H1-20 Change (%) Data in RON’000 H1-21/ H1- H1-21/ 1 2 1 2 20 (1) H1-20 (2) Restaurant sales 444,544 444,544 304,580 304,580 46.0% 46.0% Restaurant expenses 408,346 408,708 296,475 297,903 37.7% 37.2% Food and material 143,535 143,535 100,793 100,793 42.4% 42.4% Payroll and employee benefits 102,197 102,197 71,315 71,315 43.3% 43.3% Rent 7,142 33,950 3,409 29,295 109.5% 15.9% Royalties 26,489 26,489 17,884 17,884 48.1% 48.1% Advertising 20,087 20,087 14,429 14,429 39.2% 39.2% Other operating expenses, net 64,438 64,438 46,582 46,414 38.3% 38.8% Depreciation and amortization 44,458 18,012 42,063 17,773 5.7% 1.3% Restaurant operating Profit / (Loss) 36,198 35,835 8,104 6,677 346.7% 436.7% General & Admin expenses, net 25,156 25,420 23,915 24,447 5.2% 4.0% Operating Profit/(Loss) 11,042 10,415 (15,810) (17,771) 169.8% 158.6% Finance costs 10,002 3,534 9,303 2,902 7.5% 21.8% Finance income 42 42 88 88 -52.3% -52.1% Profit/(Loss) before tax 1,082 6,924 (25,026) (20,585) 104.3% 133.6% Income tax expense/(credit) (183) 559 335 796 -154.6% -29.8% Specific tax 1,179 1,179 978 978 20.5% 20.5% Profit/(Loss) for the period 85 5,185 (26,339) (22,360) 100.3% 123.2% EBITDA 58,527 30,006 28,483 772 105.5% 3,785.4% Normalized EBITDA* 59,261 30,740 29,274 1,563 102.4% 1,866.7% Notes: (1) Including the impact of the adoption of IFRS 16; (2) Excluding the impact of the adoption of IFRS 16. (*) Normalized EBITDA – excludes the penalty from franchisor for postponed development of Pizza Hut restaurants in 2019.

The G&A expenses grew by 4% in H1 2021, mainly due to cost optimization measures that focused on decreasing costs related to third-party services, transportation, and other expenses. These declines offset a 4% increase in payroll and employee benefits (driven primarily by increased activity volume), a 105% increase in depreciation and amortization as well as a 50% increase in banking changes. Overall, the share of G&A expenses in the consolidated sales decreased in the analyzed period, reaching 6%, down from 8% registered in H1 2020.

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Data in RON ‘000 Percentage of sales H1-21 H1-21 H1-20 H1-20 Change (%) H1-21 H1-21 H1-20 H1-20 2021/ 2021/ (1) (2) (1) (2) (1) (2) (1) (2) 2020 (1) 2020 (2)

General and administration 25,156 25,420 23,915 24,447 5.2% 4.0% 5.7% 5.7% 7.9% 8.0% (G&A) expenses, net Payroll and employee benefits 16,279 16,279 15,630 15,630 4.2% 4.2% Third-party services 2,536 2,536 2,603 2,888 -2.6% -12.2% Depreciation and amortization 3,027 1,579 2,231 770 35.7% 105% Rent 144 1,856 (23) 1,685 -726.1% 10.1% Banking charges 1,957 1,957 1,304 1,304 50% 50% Transport 328 328 617 617 -46.8% -46.9% Other* 885 885 1,553 1,553 -43.0% -43.0% Note: (1) Including the impact of the adoption of IFRS 16; (2) Excluding the impact of the adoption of IFRS 16. *Other expenses include maintenance & repairs, smallware, insurance, advertising, phone & postage, miscellaneous expenses.

In terms of individual performance, USFN Romania (KFC Romania) and USFN Moldova (KFC Moldova) closed H1 2021 profitable, registering EBITDA of RON 38.4 million and RON 0.8 million, respectively, and net profit of RON 26.8 million and RON 0.5 million, respectively. CFF (Taco Bell Romania) closed H1 2021 with restaurant operating profit of RON 0.4 million, but the G&A expenses, finance costs and tax expenses dragged the bottom line to a net loss of RON 1.8 million. USFN Italy (KFC Italy) and ARS (Pizza Hut Romania) ended the first six months with a net loss of RON 13.5 million and RON 5.9 million, respectively. KFC Italy’s performance continued to be impacted by the evolution of COVID-19 in the country and the prevailing restrictions that limited the reopening of the stores and thus negatively impacted the topline. Pizza Hut on the other hand continued to improve its bottom-line performance, registering another period of QOQ increases. The continuous improvement in ARS performance was driven as well by the decision of the Group to close the non-performing Pizza Hut locations in 2020.

Breakdown of consolidated results by Group companies – H1-2021 (excluding IFRS 16 Impact): H1-21 USFN USFN USFN Cons. Data in RON’000 ARS CFF SFG SFG Cons (RO) (MD) (IT) Adj. Restaurant sales 334,179 38,609 5,614 44,161 21,980 14,983 (14,983) 444,544 Dividend revenue - - - - - 37,525 (37,525) - Restaurant expenses 290,856 39,801 4,802 51,894 21,549 - (194) 408,708 Food and material 110,998 10,427 2,343 12,800 6,966 - - 143,535 Payroll and employee benefits 71,353 10,596 796 14,484 4,968 - - 102,197 Rent 24,197 3,769 325 3,805 1,855 - - 33,950 Royalties 20,023 2,272 337 2,653 1,203 - - 26,489 Advertising 14,166 2,052 207 2,622 1,216 - (176) 20,087 Other operating expenses 40,797 8,696 643 10,276 4,030 - (4) 64,438 Depreciation 9,321 1,989 150 5,255 1,311 - (13) 18,012 Restaurant operating profit/(loss) 43,323 (1,192) 812 (7,733) 431 52,509 (52,315) 35,835 G&A expenses 15,009 3,792 148 4,225 1,266 15,707 (14,727) 25,420 Operating profit/(loss) 28,315 (4,984) 663 (11,958) (835) 36,802 (37,588) 10,415 Finance costs 2,453 609 49 1,206 828 956 (2,567) 3,534 Finance income 1,983 5 - 0 - 621 (2,567) 42 Profit/(Loss) before tax 27,844 (5,588) 615 (13,163) (1,663) 36,467 (37,588) 6,924 Income tax expense/(credit) 266 - 74 332 - (113) - 559 Specific tax expense 743 340 - - 96 - - 1,179 Profit/(Loss) for the period 26,835 (5,928) 541 (13,495) (1,759) 36,580 (37,588) 5,185 EBITDA 38,377 (2,611) 831 (6,626) 520 37,119 (37,604) 30,006 Normalized EBITDA* 38,377 (1,877) 831 (6,626) 520 37,119 (37,604) 30,740

All the brands except Pizza Hut registered the highest all store sales ever recorded in the second quarter of the year (including pre-pandemic levels). In Q2 2021, the like-for-like sales across all Sphera brands skyrocketed, registering increases starting with 85% increase for USFN Italy, 99% increase for USFN Romania, 108% increase for ARS, 179% increase for USFN Moldova and 188% for CFF. Overall, the same stores performance across Sphera brands improved by 103% while all store performance for all the brands grew by 119%. Compared to same period of last year when Sphera operated 153 restaurants, at the end

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of H1 2021, the number of restaurants grew with 8 net new stores, reaching 161 locations on all three markets of activity. Y/Y Q1-20 Y/Y Q2-20 Y/Y Q3-20 Y/Y Q4-20 Y/Y Q1-21 Y/Y Q2-21 USFN RO All Stores -9.9% -51.6% -17.1% -11.5% 14.3% 114.9% o/w Same Stores -14.7% -53.5% -23.6% -17.3% 6.9% 99.4% ARS All Stores -15.8% -68.8% -51.4% -55.8% -32.6% 108.4% o/w Same Stores -15.8% -68.8% -51.4% -55.8% -32.6% 108.4% USFN MD All Stores -14.4% -62.1% -15.4% -5.3% 18.9% 179.3% o/w Same Stores -14.4% -62.1% -15.4% -5.3% 18.9% 179.3% USFN IT All Stores 11.4% -48.1% -11.7% -33.5% 2.8% 114.5% o/w Same Stores -29.5% -64.5% -27.0% -52.7% -21.1% 85.0% CFF All Stores 46.0% -55.9% -3.0% -9.2% 13.1% 245.4% o/w Same Stores -10.3% -64.4% -24.1% -22.9% 6.0% 188.0% TOTAL All Stores -7.7% -54.0% -20.4% -20.0% 6.6% 119.4% o/w Same Stores -16.0% -57.0% -27.6% -26.1% -1.1% 102.7% Q2 2021 was the best quarter for the Group on the Romanian market since the onset of the pandemic in terms of restaurant sales, as the revenues increased 119% YOY and 9% QOQ. Sales in Italy grew 114% YOY, registering a significant uptake compared to the previous two quarters as the restrictions started being lifted close to the end of Q2 2021. Republic of Moldova managed to increase sales 180% in Q2 2021 compared to same quarter of last year, the second highest turnover generated since the onset of the pandemic.

Change Change Data in RON ‘000 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q2-21/Q2-20 H1-21/H1-20 Sales by region Romania 176,764 93,821 169,260 185,816 188,944 205,824 119.4% 45.9% Italy 19,205 11,435 26,232 19,584 19,693 24,469 114.0% 44.1% Rep. Moldova 2,345 1,009 2,371 2,953 2,791 2,823 179.8% 67.4% Total sales 198,314 106,266 197,865 208,353 211,428 233,116 119.4% 46.0%

In Q2 2021, sales for delivery remained at comparable level to the previous quarter as over 29% of all orders were made for delivery, amounting to RON 68.3 million, down 2pp QOQ but nonetheless RON 2.5 million increase compared to Q1 2021. Delivery orders include sales made by aggregators as well as Sphera’s own channels, using both own and third-party courier service. Sphera has own delivery service in Romania for KFC and Pizza Hut, while for Taco Bell as well as for KFC in Italy and the Republic of Moldova, the Group delivers exclusively through the food aggregating platforms such as Glovo, Food Panda, Takeaway or Tazz. As expected, the share of the delivery orders decreased slightly QOQ as the weather improved in Q2 2021 as well as restrictions on indoor dining on most of the markets of activity were lifted by the end of the quarter, thus contributing to increase in topline.

Sales by entity, by Country Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 delivery 6% 44% 23% 28% 28% 27% USFN RO non-delivery 94% 56% 77% 72% 72% 73% delivery 33% 68% 53% 63% 57% 53% ARS non-delivery 67% 32% 47% 37% 43% 47% delivery 11% 81% 40% 42% 44% 42% CFF non-delivery 89% 19% 60% 58% 56% 58% delivery 0% 32% 11% 23% 25% 16% USFN IT non-delivery 100% 68% 89% 77% 75% 84% delivery 13% 60% 23% 25% 33% 35% USFN MD non-delivery 87% 40% 77% 75% 67% 65% delivery 9% 47% 24% 31% 31% 29% All non-delivery 91% 53% 76% 69% 69% 71%

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MAIN FINANCIAL RATIOS

The main financial ratios of Sphera Franchise Group (consolidated result) as of June 30th, 2021 (including and excluding IFRS 16 impact) are presented below, together with the result from the same period of 2020 (including IFRS 16 impact).

31 December Financial data in RON ‘000 30 June 2021(1) 30 June 2021(2) 2020*/ 30 June 2020** (1) Current ratio*

Current assets 153,318 156,446 153,481 = 0.70 = 0.89 = 0.66 Current liabilities 220,419 175,468 232,704

Debt to Equity ratio*

Interest-bearing 300,419 100,929 280,741 debt (long term) = 202% = 61% = 188%

Equity 148,783 166,635 149,121

Interest-bearing 300,419 100,929 280,741 debt (long term) = 66.9% = 37.7% = 65.3% Capital employed 449,202 267,563 429,862

Trade receivables turnover (days)**

Average receivables 16,675 16,675 34,197 = 6.75 = 6.75 = 20.21 Sales 444,544 444,544 305,580

Fixed asset turnover**

Sales 444,544 444,544 304,580 = 0.89 = 1.64 = 1.24 Net fixed assets 498,911 270,437 493,028

Notes: Annualized values, based on ASF methodology. (1) Including the impact of IFRS 16; (2) Excluding the impact of IFRS 16 Leases.

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SIGNIFICANT EVENTS IN Q2 2021 COVID-19 RELATED UPDATES

COVID-19 VACCINATION CAMPAIGNS Throughout Q2 2021, the anti-COVID-19 vaccination campaign continued in Romania, Italy, and the Republic of Moldova. At the time of publishing of this report, approximately 32% of Romanian population, 22% of Moldavian population as well as 67% of the Italian population is fully vaccinated. Romania is currently struggling with the promotion of the vaccinations as significant part of population remains skeptical. According to European Centre for Disease Prevention and Control's COVID-19 Vaccine Tracker, Romania is now second to last in the EU for the share of adults vaccinated with at least one dose, ahead only of Bulgaria. The EU-wide percentage of fully vaccinated adults is 65%. The number of COVID-19 cases in Romania has been slowly increasing throughout the summer as almost all restrictions have been lifted, and at the time of the report, the number of cases registered the highest number of infections since May 2021. Nonetheless, at the current moment, there are no plans at the government level to reintroduce lockdowns or indoor dining restrictions. LEASES Despite the partial reopening of the economy, throughout Q2 2021, the Group continued to renegotiate the lease agreements whenever possible. Consequently, in Q2, the Group benefitted from rent discounts amounting to RON 1.52 million, out of which RON 0.9 were granted to ARS, 0.6 to USFN IT and 0.01 to USFN Moldova. Paired with RON 1.25 million in discounts obtained in Q1 2021, in H1 2021, the Group registered a saving in total amount of RON 2.77 million. STAFF As of June 30th, 2021, the Group had 4,392 employees, out of which 4,058 in Romania, 253 in Italy and 81 in the Republic of Moldova. COVID-19 pandemic put additional pressure on the HoReCa industry as many employees decided to requalify to other sectors. Consequently, in H1 2021 the Group continued the project of hiring employees from abroad. So far, Sphera hired 112 employees from Sri Lanka, with vast majority of them currently working for USFN Romania and approximately 15% for Taco Bell. In terms of technical unemployment indemnities, in H1 2021 the Group registered RON 2.47 million, out of which RON 1.27 million were granted in Q1 2021 and RON 1.2 were granted in Q2 2021. HORECA AID IN ROMANIA On December 30th, 2020, Emergency Ordinance 224/30.12.2020 was published that stipulates that companies from HoReCa sector can apply for a state aid in the amount that represents 20% of the loss of turnover in 2020 compared to 2019, capped at EUR 800,000 at Group level. The Group has applied for the aid and the application is currently under analysis with the relevant authorities. HORECA SPECIFIC TAX FACILITY At the end of 2020, the Romanian government adopted the payment exemption regarding specific income tax due in 2021 by the economic operators from HoReCa sector, for a period of 90 days, starting from January 1st, 2021. On March 25th, the payment exemption was prolonged for another 90 days, starting with April 1st, 2021. The Group has posted specific income tax in amount of RON 1.2 million due for H1 2021, taking into consideration the total period of 180 days of exemption when calculating 2021 annual tax amount. The total impact of this measure on Sphera’s result was a saving of estimated RON 2.3 million for the year 2021. On June 24th, Emergency Ordinance 59/2021 was published that stipulates that the payment of H1 specific tax is postponed to December 25, 2021.

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BUSINESS AND CAPITAL MARKET RELATED UPDATES

DEVELOPMENT OF THE NETWORK In H1 2021, Sphera opened 4 new restaurants – 2 new KFC stores in Romania, in Sfantu Gheorghe and in Braila, 1 new KFC store in Italy – the first Drive Thru location outside of Romania, in Pomezia, Lazio and 1 new Taco Bell store, in Palas Mall in Iasi. At the same time, in Romania one PHD store was identified as non-viable and closed, being already impaired as of December 31st, 2020. Consequently, as of 30.06.2021, Sphera operated 161 stores, out of which 140 based in Romania (88 KFC, 21 Pizza Hut, 17 Pizza Hut Delivery and 12 Taco Bell restaurants, 1 restaurant under Paul brand and 1 PHD subfranchise), 19 KFC restaurants in Italy and 2 in Moldova. SIGNIFICANT EVENTS AFTER CLOSING OF THE REPORTING PERIOD BUSINESS AND CAPITAL MARKET RELATED UPDATES

UPDATE TO THE PIZZA HUT RESTAURANT DEVELOPMENT PLAN On August 13th, 2021, Sphera informed the investors about the closing of negotiations with master franchisor YUM! and ARS regarding the development plan for Pizza Hut. The original restaurant rollout plan as agreed between YUM! and ARS, applicable for period 2017-2021, considered opening of 8 new restaurants in 2020 and 9 new restaurants in 2021, in Romania. During the renegotiations, the parties have agreed on a minimum net new unit target (base tier) for the period 2021- 2023. The new minimum net unit target as agreed by the parties is as follows:

• 3 new Pizza Hut restaurants in 2021; • 3 new Pizza Hut restaurants in 2022; • 4 new Pizza Hut restaurants in 2023.

All net new units shall be fast-casual delivery outlets, however out of the new restaurants, ARS will be permitted to open 1 express outlet in 2021, 1 express outlet in 2022, and no more than 2 express outlets in 2023.

ARS will also benefit of progressive financial incentives, depending on the number of net new restaurants being opened. For each new net restaurant that exceeds the base tier, ARS will benefit of additional financial incentives. In terms of the initial franchise fees for years 2019 and 2020 related to the previous development plan as well as accrued penalties for not meeting the minimum target for new Pizza Hut restaurants from 2019, the parties agreed to use these amounts in entirety as a reinvestment credit, which will be deployed into development of the Pizza Hut and Pizza Hut Delivery network in Romania. DIVIDEND On August 19th, 2021, the Ordinary General Shareholder Meeting of the Group approved the distribution of dividends in the total amount of RON 35 million, from the undistributed profit from 2019 and 2020. The gross dividend per share is RON 0.9021. The ex-date for dividend is September 16th, with payment date being set up for September 30th. LAUNCH OF MARKET MAKING FOR SFG SHARES As of August 24th, 2021, BRK Financial Group acts as the Issuer Market Maker for Sphera Franchise Group with the purpose of enhancing the liquidity of SFG shares. The IMM is the participant in the BVB’s trading system that has taken on the role of sustaining the liquidity of a financial instrument, based on a contract concluded with the issuer of the respective financial instruments, as well as with BVB. The specific parameters that apply to the IMM activity provided by BRK Financial Group to Sphera Franchise Group are available HERE.

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ABOUT SPHERA FRANCHISE GROUP

The Group’s franchised foodservice business was launched in 1994 with the opening of the first Pizza Hut location, which was followed by the opening in 1997 of the first KFC location, both in Bucharest. As of 30 June 2021, the Group operates 161 restaurants in Romania, Italy, and the Republic of Moldova.

Sphera Franchise Group’s business is conducted through the following segments:

• Quick-service restaurants - through KFC restaurants (in Romania, the Republic of Moldova and Italy) and Taco Bell restaurants (in Romania); • Full-service restaurants - through Pizza Hut Dine-In restaurants in Romania; • Delivery restaurants - through Pizza Hut delivery units in Romania.

KFC, Pizza Hut, Pizza Hut Delivery and Taco Bell are all operated in a master franchise system, by companies owned by Sphera Franchise Group, the largest restaurant group in the full-service restaurant sector in Romania. A master franchise is a franchising contract in which the master franchisor hands over the control of the franchising activities in a specified territory to a person or entity, called the "master franchisee". Yum! is the master franchisor of Sphera Franchise Group.

ABOUT THE BRANDS

KFC is the world’s second-largest restaurant chain as measured by sales. KFC is a quick- service restaurant specialized in fried chicken and chicken meals. As of December 2020, there were up to 25,000 KFC Restaurants worldwide. The first KFC restaurant was launched in Bucharest, Romania in 1997 by the Group.

Today, KFC is the leading chicken restaurant chain in Romania in terms of both total sales and number of restaurants. As of 30 June 2021, there were 88 KFC in Romania. In 2008, the Group opened the first KFC restaurant in the Republic of Moldova, and as of 30 June 2021, the Group operated two restaurants (both in Chisinau). In 2017 the Group opened the first two restaurants in Italy. As of 30 June 2021, there were 19 KFC restaurants operated by the Group spread across the central - northern region of Italy. Of all KFC restaurants operating in Romania, Italy and Republic of Moldova, as of June 30, 2021, 66 were food court locations (in malls or commercial centers), 23 were inline (street locations), while another 20 were Drive- Thru locations. In 2018, KFC Romania has lunched the delivery activity, which is now carried out in most of the stores.

In all KFC restaurants, the Group sells food and beverages products either individually or part of a price- attractive bundle labelled "menu". Generally, the menus include three main components: a portion of a chicken-based product (sandwiches, wrappers, or pieces of chicken meat), a medium-sized portion of French fries and a medium-sized non-alcoholic drink. For an additional price, our customers can choose to opt for the "Go Large" version of the menu, which consists of large-sized portions of French fries and non- alcoholic drink. A dipping sauce is also offered in some menu offers. Whereas menus are normally sized for one person, we also offer products, called Buckets, that are targeted for group consumption (normally, up to four persons). Buckets generally consist of higher number of pieces of chicken meat, and some include portions of French fries and non-alcoholic drinks.

PIZZA HUT is a casual dine-in restaurant, known for its Italian American cuisine. With 18,703 restaurants across the globe, it is the world’s largest pizza chain in terms of locations. Restaurants serve a diverse menu which includes pizza and pasta, salads as well as side dishes and desserts. Pizza Hut entered the Romanian market in 1994, with the opening of its first location on Calea Dorobanților in Bucharest. PIZZA HUT DELIVERY is the concept for home delivery launched by Pizza Hut. Pizza Hut Delivery has been present on the Romanian market since December 2007, with the opening of its first location in Vitan area, Bucharest.

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Pizza Hut is the largest casual dine-in restaurant chain in Romania in terms of both total sales and number of restaurants. As of 30 June 2021, there were 21 Pizza Hut Dine-In restaurants across the major cities of Romania and 17 Pizza Hut Delivery restaurants. Of the 21 Pizza Hut Dine-In restaurants operating in Romania as of 30 June 2021, 18 are located near food courts with our dedicated seating (in malls or commercial centers) and 3 are inline (street locations). At the same time, 6 out of the 17 Pizza Hut Delivery restaurants were located within commercial centers, while the remaining 11 were inline locations.

Pizza Hut restaurants primarily sell pizza (a wide range of traditional and proprietary recipes, on a variety of dough types, such as pan, classic, thin, Italian, cheesy bites, crown crust) and pasta, other main-course products (such as burgers and ribs) as well as beverages (primarily non-alcoholic) and deserts.

TACO BELL is the world’s leading Mexican-inspired quick service restaurant (QSR). The restaurants serve a variety of Mexican inspired foods that include tacos, burritos, quesadillas, nachos, novelty and specialty items and a range of “value menu” products. The first Taco Bell store was launched in Bucharest, Romania, by Sphera Franchise Group in October 2017. As of 30 June 2021, the Group operated 12 Taco Bell restaurants based in commercial centers across Romania.

All the brands offered by Sphera Franchise Group provide a friendly working environment, focused on the potential to develop their employees' career and various culinary experiences with traditional and innovative recipes for the clients.

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RISKS AND EXPECTATIONS REGARDING H2 2021

April 28th, 2021, the annual General Shareholders Meeting of Sphera Franchise Group took place, which approved the 2021 consolidated Budget and Activity Plan of the Group, which estimated RON 1,157.6 million in restaurant sales in 2021, RON 150.5 in restaurant operating profit and normalized EBITDA of RON 95 million. The management maintains these budget targets as well as the activity plan. The evolution of the pandemic remains the key risk for Sphera’s activity in the second half of the year. The budget adopted by shareholders in April assumed the progressive recovery of sales throughout 2021. For H1 2021, it was estimated that the activity of the Group will continue to be affected by restrictions imposed by the state and local authorities due to pandemic situation, however as of H2 2021, normal course of business was assumed. Consequently, the Group estimates RON 1,157.6 million in restaurant sales in 2021, RON 150.5 in restaurant operating profit and normalized EBITDA of RON 95 million. The delivery is expected to have a significant weight in total sales in 2021, of around 25%. Especially in the context of the pandemic, the management would like to bring attention to the most critical risks as foreseen in H2 2021. Risks related to ordering a lockdown – Considering the evolution of the COVID-19 pandemic, there exists a chance that lockdowns, including the temporary closure of restaurants, hotels, cafes, clubs, shopping malls, gradual closure of borders, limiting or prohibiting the movement of vehicles or people in/to certain areas can be implemented throughout Europe, including in the countries of activity of the Group. The lockdowns can be applied at the national level, impacting all the restaurants of the Group in one country of operation, as well as at a local level, impacting restaurants located in certain municipalities or regions that are subject to restrictions. The rapid change in the strategy of the Group throughout 2020 and the almost complete reliance on the delivery and take-out services to generate revenues have prepared the Group for another potential lockdown in H2 2021 thus lowering the extent of the negative impact of this risk. This, however, does not guarantee that in case of negative evolution of the pandemic in H2 2021 and potential lockdowns implemented at a scale similar to that from H1 2020, the Group will be able to meet the 2021 budget assumptions. Risks related to the general economic environment in the markets – The results of the Group can be directly affected by economic conditions, especially employment levels, inflation, real disposable income, consumption, access to consumer credit, consumer confidence, applicable taxes and consumer's willingness to spend money in the markets and geographic areas in which it operates. This risk remains highlighted for H2 2021 as even though global but also local economies managed to recover faster than expected, there remains a risk that the novel coronavirus pandemic might negatively affect the global economy. A decrease in disposable income may affect the customer traffic, frequency, average ticket size as well as the Group's ability to pass the cost increases onto its customers. Nonetheless, this trend is offset by the overall affordability of the Groups products, which may also lead to the Group leading new clients, amongst the customers who may substitute more expensive dining options with Group's products. Risks related to inability to meet the development plan – The Group estimates its continuous growth based on the development plan, which includes constant development of the restaurant network on all markets of the activity, in line with the targets agreed with master franchisor, YUM!. However, it is possible that the pace at which the company opens new stores may not be in line with expectations and estimates. There is also a risk that new locations as well as new restaurant concepts launched on Sphera’s market of activity might underperform due to customer preferences, market specificities but also individual locations. Any of such or similar situations may have a negative impact on the company’s financial situation. Risks related to the competitive environment – The Group operates in a highly competitive market, particularly concerning food quality, price, service, convenience, and concept, which in turn may be affected by considerations such as changes in consumer preferences. The Group competes against international chains, national, regional, and local businesses in the quick-service, casual dine-in and delivery and takeaway restaurant sectors. This competition can put downward pressure on product prices and demand

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for the Group's products. In the context of the pandemic, in H1 2020, the Group has decided to include the food aggregators in its sales strategy to increase the customer base and extend the delivery coverage while avoiding the increase in personnel costs. This decision has allowed the Group to recover part of the revenues lost due to the temporary closing of the restaurants. The Group will maintain this strategy in the coming period. Risk related to limited access to foodstuffs and the variability of their cost – The Group needs to ensure frequent deliveries of fresh agricultural products and foodstuffs. The Group cannot rule out the risk related to delivery deficits or interruptions caused by factors such as unfavorable weather conditions, changes in legal regulations or withdrawing some foodstuffs from trading. The demand for certain products paired with a limited supply may lead to difficulties in obtaining them as well as price increases, thus having an adverse effect on the Groups results. There is a risk related to the fact that limited portion of Sphera's supplies comes from the UK and following the Brexit, an increase in prices of those supplies might be registered. To mitigate this risk, the Group's procurement division has prepared to switch to alternative providers if the above situation occurs. Payroll – Cost of labor represents the second most important expense for the Group and was the fastest growing expense item at restaurant level over the past years. It is expected for the personnel costs to grow proportionally with the growth of the number of the restaurants and the restaurant revenue. Factors that influence fluctuations in the labor costs include minimum wage and payroll tax legislation, the frequency and severity of labor-related claims, health care costs, the performance of restaurants, new openings and whether new employees are fixed overhead costs or are restaurant hires. Price risk - Cost of sales represents the most significant expense of the Group. Gross margin is affected by several factors, including movements in the cost of sales, the extent to which the Group can negotiate favorable prices and rebates from suppliers as well as the mix of products that it sells from time to time. The Group seeks to procure its principal inputs from multiple suppliers, in case the primary suppliers cannot deliver the components in the contracted amounts and specifications, the Group's requirements exceed the minimum contracted amounts, or the Group is subjected to unanticipated price increases. Market conditions generally set prices of the Group's raw materials, and it might not be possible to pass these charges immediately onto customers. Risk related to product liability claims and health pandemics – Product liability claims and health pandemics, especially poultry-related, could harm consumers' confidence in the safety and quality of our products The Group may be involved in product liability claims typical for the food industry, such as product alteration or injury following consumption. Also, incidents of health pandemics, food-borne illnesses or food tampering could force the Group to close several restaurants for an undetermined period. Widespread diseases such as avian influenza, the H1N1 influenza virus, e-coli, or hepatitis A generally affecting the population may cause customers to avoid certain products, resulting in lack of confidence from customers in the products offered by the Group, especially in poultry food. What is more, even if such poultry-related health pandemics would not affect the products provided by the Group, but by other restaurants, still a direct impact can be produced over consumers, who might avoid poultry products irrespective of who is offering them. This would result in a decrease in the number of clients for the Group's restaurants. Furthermore, the Group's reliance on third-party food suppliers and distributors increases the risk of food- borne illness incidents to all of the Group's restaurants that are served by the respective suppliers and distributors. Power outages and other issues beyond the Group's control can result in costly spoilage or contamination of food. Also, any media news or reports of inspection authorities released to the public identifying unsanitary preparation or preservation of food products in restaurants that are not related to the Group or that are not under the Group's control may change the perception of its customers about the quality of the products in restaurants in general. Adverse publicity may negatively impact our reputation, regardless of whether the allegations are valid. As our core business is the operation of restaurants, the Group depends on consumer confidence in the quality and safety of food products offered in our restaurants. While the Group maintains high standards for the quality of food products and dedicates substantial resources to ensure that these standards are met, the spread of these illnesses is often beyond its control and the Group cannot assure that food-borne

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diseases will not occur, as a result of consumption of its products. Product liability risks are currently not covered by product liability insurance. All the above could, with immediate effect, result in significantly reduced demand for our food, reduced guest traffic, severe declines in restaurant sales and financial losses as well as significant reputational damages and legal claims of aggrieved guests, even if we were ultimately deemed not to be responsible for the issue or our liability was limited. A decrease in customer confidence in the Group's products as a result of real or perceived public health concerns or negative publicity may have a material adverse effect on our business, results of operations and financial condition. Risk related to dependency on the franchisor – Sphera manages KFC (in Romania, Italy, and Moldova) and Pizza Hut and Taco Bell (in Romania), as a franchisee, and therefore a number of factors and decisions related to the business activities conducted by Sphera depend on the franchisors’ decisions or on their agreement. The duration of the franchising agreements related to the KFC, Pizza Hut and Taco Bell brands is 10 years. Sphera has the option of extending this period for the next 10 years if it meets the conditions specified in the franchising agreements and other requirements, including the payment of the related continuation fee. Despite meeting the above-mentioned terms, there is no guarantee that after the expiry of these periods a given franchising agreement will be prolonged to the next period. In the case of KFC restaurants, the first period commenced in 1997, the first Pizza Hut restaurant opened on the Romanian market in 1994, while for Taco Bell, the first period commenced in 2017 with the opening of the first restaurant of this brand. Sphera and Yum! are constantly in touch with respect to current and further cooperation.

Investors should consider that the risks presented above are the most significant risks for the H2 2021 that Sphera Franchise Group is aware of at the time of redacting this report. However, the risks presented in this section do not include all the risks associated with the issuer's activity, and the Group cannot guarantee that it includes all the relevant risks for H2 2021. There may be other risk factors and uncertainties of which the Group or the companies from the Group is not aware at the time of preparing this report and which may in future modify the actual results, financial conditions, performances and achievements of the issuer and may lead to a decrease in the price of the Group's shares. Investors should undertake pre-requisite checks to prepare their investment opportunity assessment. The management recommends investors to read a more elaborated list of risks that Sphera Franchise Group is subject to, that was included in the Listing Prospectus, available here, which nonetheless cannot be treated as exhaustive.

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DECLARATION FROM THE MANAGEMENT

Bucharest, August 31st, 2021

We confirm to the best of our knowledge that the unaudited interim condensed consolidated and unaudited interim condensed separate financial statements for the six months period ended 30 June 2021 give a true and fair view of Sphera Franchise Group’s assets, liabilities, financial position and profit and loss, as required by the applicable accounting standards, and that the Directors’ Report gives a true and fair view of important events that have occurred during the first six months of the 2021 financial year and their impact on the interim condensed consolidated and interim condensed separate financial statements.

Chief Executive Officer Chief Financial Officer

Calin Ionescu Valentin Budes

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INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED)

The interim condensed consolidated financial statements presented below are prepared in accordance with International Financial Reporting Standards, as adopted by European Union (“IFRS”). The interim condensed consolidated financial statements are unaudited.

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SPHERA FRANCHISE GROUP SA INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE SIX- MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED) All amounts in RON thousand, unless specified otherwise

INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED)

Six-month period ended 30 June 30 June Note 2021 2020

Restaurant sales 444,544 304,580

Restaurant expenses

Food and material expenses 143,535 100,793

Payroll and employee benefits 4 102,197 71,315

Rent 7,142 3,409

Royalties 26,489 17,884

Advertising 20,087 14,429

Other operating expenses, net 5 64,438 46,582 Depreciation, amortization and impairment of non-

current assets 7 44,458 42,063

Restaurant operating profit 36,198 8,104

General and administration expenses, net 6 25,156 23,915

Operating profit/ (loss) 11,042 (15,810)

Finance costs 8 10,002 9,303

Finance income 42 88

Profit/(Loss) before tax 1,082 (25,026)

Income tax expense/(credit) (183) 335 Specific tax expense 1,179 978

Profit/(Loss) for the period 85 (26,339)

Attributable to:

Equity holders of the parent (5) (26,321)

Non-controlling interests 90 (18)

Other comprehensive income Other comprehensive income to be reclassified to

profit or loss in subsequent periods (net of tax): Exchange differences on translation of foreign

operations (76) 80 Total comprehensive income for the period, net

of tax 10 (26,259)

Attributable to:

Equity holders of the parent (98) (26,239)

Non-controlling interests 108 (19)

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SPHERA FRANCHISE GROUP SA INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE SIX- MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED) All amounts in RON thousand, unless specified otherwise

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2021 (UNAUDITED)

30 June 31 December 2021 2020 Assets Non-current assets 521,230 513,794 Property, plant and equipment 208,299 201,118 Right-of-use assets 230,403 230,454 Intangible assets 60,209 61,173 Trade and other receivables 490 402 Deposits for rent guarantee 7,528 7,017 Deferred tax assets 14,300 13,629

Current assets 153,318 153,481 Inventories 11,097 11,099 Trade and other receivables 14,988 18,361 Prepayments 3,299 2,112 Cash and short-term deposits 123,934 121,909

Total assets 674,548 667,275

Equity and liabilities Equity Issued capital (Note 10) 581,990 581,990 Share premium (519,998) (519,998) Other reserves (917) (917) Retained earnings 88,029 88,033 Foreign currency translation reserve (334) (240) Equity attributable to equity holders of the parent 148,770 148,868 Non-controlling interests 13 253 Total equity 148,783 149,121

Non-current liabilities 305,346 285,450 Interest-bearing loans and borrowings (Note 9) 100,765 83,859 Lease liabilities 199,654 196,883 Net employee defined benefit liabilities (Note 4) 4,134 3,141 Trade and other payables 793 1,567

Current liabilities 220,419 232,704 Trade and other payables 124,600 118,505 Interest-bearing loans and borrowings (Note 9) 45,126 66,350 Lease liabilities 50,693 47,850

Total liabilities 525,765 518,154 Total equity and liabilities 674,548 667,275

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SPHERA FRANCHISE GROUP SA INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED) All amounts in RON thousand, unless specified otherwise

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED)

Foreign currency Non- Issued Share Other Retained translation controlling capital premium reserves earnings reserve Total equity interest Total equity

As at 1 January 2021 581,990 (519,998) (917) 88,033 (240) 148,868 252 149,120 Profit for the period - - - (5) - (5) 90 85

Other comprehensive income Translation differences (94) (94) 18 (76) Total comprehensive income - - - (5) (94) (98) 108 10

Cash dividends ------(347) (347) At 30 June 2021 581,990 (519,998) (917) 88,029 (334) 148,770 13 148,783

Foreign currency Non- Issued Share Other Retained translation controlling capital premium reserves earnings reserve Total equity interest Total equity

As at 1 January 2020 581,990 (519,998) (1,178) 111,402 (166) 172,049 202 172,251 Loss for the period - - - (26,321) - (26,321) (18) (26,339)

Other comprehensive income Translation differences 82 82 (1) 80 Total comprehensive income - - - (26,321) 82 (26,239) (19) (26,259)

Cash dividends - - - (13,679) - (13,679) - (13,679) At 30 June 2020 581,990 (519,998) (1,178) 71,402 (84) 132,131 182 132,313

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SPHERA FRANCHISE GROUP SA INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED) All amounts in RON thousand, unless specified otherwise

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED)

Six-month period ended 30 June 30 June 2021 2020 Operating activities Profit/(Loss) before tax 1,082 (25,026) Adjustments to reconcile profit(loss) before tax to net cash flows: Depreciation of right-of-use assets 28,006 25,898 Depreciation and impairment of property, plant and equipment 17,285 16,736 Amortisation and impairment of intangible assets 2,193 1,659 Movement in current assets allowance 170 - Rent concessions (discounts) (2,769) (4,419) Unrealised net foreign exchange differences 3,274 3,208 (Gain)/Loss on disposal of property, plant and equipment 8 42

Finance income (42) (88) Finance costs (interest) 7,090 6,645

Working capital adjustments: Decrease/(Increase) in trade and other receivables and prepayments 1,417 17,726 Decrease/(Increase) in inventories 2 1,573 Increase/(Decrease) in trade and other payables 6,325 3,436

Interest received 42 88 Interest paid (7,024) (6,592) Income tax paid (1,317) (2,460)

Net cash flows from operating activities 55,742 38,426

Investing activities

Proceeds from sale of property, plant and equipment - 86 Purchase of intangible assets (1,229) (904) Purchase of property, plant and equipment (24,475) (17,701) Net cash flows used in investing activities (25,704) (18,519)

Financing activities

Proceeds from borrowings 48,714 Repayment of borrowings (5,561) (11,601) Payment of lease liabilities (22,111) (19,723) Dividends paid to equity holders of the parent - (13,671) Dividends paid to non-controlling interests (158) -

Net cash flows used in financing activities (27,830) 3,719

Net increase in cash and cash equivalents 2,208 23,626 Net foreign exchange differences (183) 8 Cash and cash equivalents at 1 January 121,909 57,272

Cash and cash equivalents at 30 June 123,934 80,906

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SPHERA FRANCHISE GROUP SA INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED) All amounts in RON thousand, unless specified otherwise

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED)

1 CORPORATE INFORMATION

These interim condensed consolidated financial statements are prepared by Sphera Franchise Group SA and comprise its activities and those of its subsidiaries, together referred hereinafter as ‘’SFG’’ or ‘’the Group’’. Sphera Franchise Group SA is listed on Bucharest Stock Exchange under the symbol “SFG”. Sphera Franchise Group SA (‘’the legal Parent’’, or ‘’Sphera’’) was incorporated on 16 May 2017 as a joint stock company and is registered at No. 239 Calea Dorobanti, Bucharest, Romania.

The Group operates quick service and takeaway restaurant concepts (a chain of 109 restaurants) under the Kentucky Fried Chicken (‘’KFC’’), spread across Romania as well as in the Republic of Moldova and in Italy. The Group also operates in Romania a chain of pizza restaurants (21 restaurants as at 30 June 2021) as well as pizza delivery points (18 locations as at 30 June 2021, including one sub-franchise restaurant) under the Pizza Hut (“PH”) and Pizza Hut Delivery (“PHD”) brands, one chain of restaurants under the “Taco Bell” brand (12 restaurants as at 30 June 2021) and one restaurant under Paul brand.

US Food Network SA (USFN), the subsidiary which operates the KFC franchise in Romania was incorporated in 1994 as a joint stock company and is registered at No. 239 Calea Dorobantilor Street, Bucharest, Romania.

American Restaurant System SA (ARS) operating the Pizza Hut and Pizza Hut Delivery franchises was incorporated in 1994 as a joint stock company and is registered at No. 239 Calea Dorobantilor Street, Bucharest, Romania.

The Moldavian subsidiary, US Food Network SRL which operates the KFC franchise in Moldova, was incorporated in 2008 as a limited liability company and is registered at No. 45 Banulescu Bodoni Street, Chisinau, Republic of Moldova. The Group owns 80% of the company’s shares.

The Italian subsidiary, US Food Network Srl operating the KFC franchise in Italy was incorporated in 2016 as a limited liability company and is registered at No. 5 Viale Francesco Restelli Street, Milano, Italy. The Group owns 100% of the company’s shares.

California Fresh Flavors SRL (CFF) was set up on 19 June 2017 and operates Taco Bell franchise in Romania. Sphera owns 99.99% of the company’s shares. The company operates as a limited liability company and is registered at No. 239 Calea Dorobanti, Bucharest, Romania.

2 BASIS OF PREPARATION OF THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The interim condensed unaudited financial statements of the Group as of and for the six-month period ended 30 June 2021 have been prepared in accordance with IAS 34 Interim Financial Reporting.

The financial statements have been prepared on a historical cost basis. The financial statements are presented in Romanian Lei (‘’RON’’) and all values are rounded to the nearest thousand RON, except when otherwise indicated. Accordingly, there may be rounding differences.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group’s annual consolidated financial statements as at 31 December 2020.

The interim condensed consolidated financial statements for six-month period ended 30 June 2021 included in this report are unaudited.

General accounting policies 23 23

SPHERA FRANCHISE GROUP SA INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED) All amounts in RON thousand, unless specified otherwise

The accounting policies and valuation methods adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended 31 December 2020. The amendments effective since 1 January 2021 do not have a material impact on the Group’s interim condensed consolidated financial statement. The Group has not early adopted any other standards, interpretations or amendments that have been issued but are not yet effective.

In May 2020 IASB issued COVID-19-Related Rent Concessions - amendment to IFRS 16 Leases that provide relief to lessees from applying IFRS 16 guidance on lease modification accounting for rent concessions arising as a direct consequence of the COVID-19 pandemic. As a practical expedient, a lessee may elect not to assess whether a COVID-19 related rent concession from a lessor is a lease modification.

The Group has applied the amendment to IFRS 16 already in 2020 for the first time, the effect of the accounting being presented as “rent concessions” (discounts). One of the conditions of applying the amendment was that it related to a reduction in lease payments due originally on or before 30 June 2021. However, the pandemic has continued beyond the period envisaged when the 2020 Amendment was issued. In April 2021 IASB has extended the amendment to IFRS 16 and the entities were allowed to apply the amendment to a reduction in lease payments originally due on or before 30 June 2022 (the 2021 Amendment).

Foreign currencies

The Group’s interim condensed financial statements are presented in Romanian New Lei (‘’RON’’), which is also the legal parent Company's functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency (namely Moldavian Leu ‘’MDL’’ for the Moldavian subsidiary and the Euro ‘’EUR’’ for the Italian subsidiary).

The Group uses the direct method of consolidation and on disposal of a foreign operation, the gain or loss that is reclassified to profit or loss reflects the amount that arises from using this method.

The exchange rate RON – EUR as at 30 June 2021 and 31 December 2020 were:

30 June 31 December 2021 2020

RON – EUR 4.9267 4.8694 RON – USD 4.1425 3.9660 RON – MDL 0.2302 0.2305

Transactions and balances

Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency spot rate at the date the transaction first qualifies for recognition.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date.

Differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of monetary items that are designated as part of the hedge of the Group’s net investment of a foreign operation. These are recognised in OCI until the net investment is disposed of, at which time, the cumulative amount is classified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in OCI.

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SPHERA FRANCHISE GROUP SA INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED) All amounts in RON thousand, unless specified otherwise

Group companies

On consolidation, the assets and liabilities of foreign operations are translated into RON at the rate of exchange prevailing at the reporting date and their revenues and expenses are translated at exchange rates prevailing at the dates of the transactions. The exchange differences arising on the translation are recognised in OCI. On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is recognised in the profit or loss.

3 GROUP INFORMATION

Investments in controlled companies

Details of the Group consolidated subsidiaries at 30 June 2021 and 31 December 2020 are as follows: Control Control Country of Field of 30 June 31 December Company name incorporation activity 2021 2020

US Food Network SA Romania Restaurants 99.9997% 99.9997% American Restaurant System SA Romania Restaurants 99.9997% 99.9997% California Fresh Flavours SRL Romania Restaurants 99.9900% 99.9900% US Foods Network SRL Moldova Restaurants 80.0000% 80.0000% US Food Network SRL Italy Restaurants 100.0000% 100.0000%

The value of non-controlling interests in USFN, ARS and CFF as of 30 June 2021 is below 1 thousand RON therefore there are no other presentations thereof.

4 PAYROLL AND EMPLOYEE BENEFITS

Six-month period ended 30 June 30 June 2021 2020 Payroll and employee benefits recognized in restaurant expenses 102,197 71,315 Payroll and employee benefits recognized in "General and administration expenses, net" 16,279 15,630 Total Payroll and employee benefits 118,476 86,945

For the six-month period ended 30 June 2021, payroll and employee benefits include government grants in total amount of 2,473 (19,095 for the six-months period ended 30 June 2020) representing the state support programs deployed by the governments in the countries where the Group operates, as part of the supportive measures for the employee-related costs incurred by the companies affected by a temporary reduction and/or interruption of activity due to COVID-19 pandemic (i.e. technical unemployment indemnity).

Payroll costs of 785 representing the value of project management and other technical activities performed by the Group’s employees during the six-month period ended 30 June 2021 (2020: 388) for the construction or refurbishment of restaurants were capitalized in the cost of construction of the non-current assets.

Net employee defined benefit liabilities (Italian subsidiary) In accordance with the local labour regulations, Italian companies have to pay to their employees a leaving- service indemnity (“TFR”). The accrual for termination benefits in amount of 4,134 (3,141 as at 31 December 2020) was calculated as a career-average lump sum, in accordance with the Italian statutory regulations. The Group performs an actuarial computation of these termination benefits in line with the IAS 19 “Employee benefits”.

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SPHERA FRANCHISE GROUP SA INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED) All amounts in RON thousand, unless specified otherwise

5 OTHER OPERATING EXPENSES, NET

Six-month period ended

30 June 2021 30 June 2020

Third-party services 37,913 23,381 Utilities 11,074 9,726 Maintenance and repairs 6,610 4,417 Cleaning supplies 2,015 2,716 Transport 2,446 2,236 Small-wares 1,561 853 Penalties related to development franchise agreement (ARS) 734 791 Telephone and postage 496 392 Insurance 367 375 Net (gain)/loss on disposal of property, plant and equipment 8 42 Miscellaneous expenses and income, net 1,042 1,655 Provision for receivables, net 170 - Total 64,438 46,582

6 GENERAL AND ADMINISTRATION EXPENSES, NET

Six-month period ended 30 June 2021 30 June 2020

Payroll and employee benefits 16,279 15,630 Third-party services 2,536 2,603 Depreciation and amortization 3,027 2,231 Rent 144 (23) Banking charges 1,957 1,304 Transport 328 617 Maintenance and repairs 158 147 Small-wares 59 26 Insurance 246 265 Advertising 75 487 Telephone and postage 145 131 Miscellaneous expenses and income, net 203 496 Total 25,156 23,915

7 DEPRECIATION AND AMORTIZATION Six-month period ended 30 June 30 June 2021 2020

Depreciation and amortization of right-of-use assets, recognized in "Restaurant expenses" 26,526 24,367 Depreciation, amortization and impairment of property, plant and equipment and intangible assets, recognized in "Restaurant expenses" 17,933 17,696 Depreciation, amortization and impairment recognized in "Restaurant expenses" 44,458 42,063 Depreciation and amortization of right-of-use assets recognized in "General and administration expenses, net" 1,481 1,531 Depreciation, amortization and impairment of property, plant and equipment and intangible assets recognized in "General and administration expenses, net" 1,546 700 Depreciation, amortization and impairment recognized in "General and administration expenses, net" 3,027 2,231 Total depreciation and amortization 47,485 44,294

26 26

SPHERA FRANCHISE GROUP SA INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED) All amounts in RON thousand, unless specified otherwise

8 FINANCE COSTS Six-month period ended 30 June 30 June 2021 2020

Interest on loans and borrowings 2,727 2,300 Interest expense on lease liabilities 4,363 4,345 Interest cost on benefit obligation 6 5 Foreign exchange loss, net 2,906 2,653 Total finance costs 10,002 9,303

27 27

SPHERA FRANCHISE GROUP SA INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED) All amounts in RON thousand, unless specified otherwise

9 INTEREST-BEARING LOANS AND BORROWINGS

30 June 31 December Interest rate, % Maturity 2021 2020 Current interest-bearing loans and borrowings Bank loan EURIBOR 3M + relevant 6 years from each 20,831 36,450 spread withdrawal Short term working capital facility ROBOR 3M + relevant 1 year from contract 24,339 29,900 spread date Total current interest-bearing loans and borrowings 45,170 66,350

Non-current interest-bearing loans and borrowings Bank loan EURIBOR 3M + relevant 6 years from each 100,721 83,859 spread withdrawal Total non-current interest-bearing loans and borrowings 100,721 83,859 Total interest-bearing loans and borrowings 145,891 150,209

The Group has a credit facility from Alpha Bank Romania made up of 7 sub-limits, out of which can be accessed by companies included in the consolidation, as follows: credit facility for the development of new locations, issuance of bank guarantee letters, credit card, financing of Moldova subsidiary, financing of working capital and financing of Italian subsidiary. The loan is secured with property, plant and equipment of each restaurant location for which the credit limited has been utilised, pledge on business goodwill, pledge on current accounts opened with the bank, promissory notes issued, pledge on receivables from and shares owned by the Group in its Moldova and Italia subsidiary.

In January 2021, the parties agreed by an addendum to loan contract to extend the grace period for principal payments for twelve-month period, until 31 December 2021. All principal amounts initially due during suspension period will be paid beginning 1 January 2022 and loan maturities are postponed in accordance. Interest payments are not suspended.

Starting with 29 May 2021, the short-term borrowing arrangement with Vista Bank Romania in total amount of 10 million RON has been extended for another year. Credit facility is revolving and may be used by the Borrower during 12 months for financing of working capital needs and of generic company costs, as well as intragroup loans. As at 30 June 2021 and 31 December 2020, the loan balance with Vista Bank is nil.

The Group (USFN Romania - Borrower and Sphera Franchise Group SA - Guarantor) has a short-term credit facility agreement with Intesa Sanpaolo Romania Bank. The uncommitted credit facility amounting to RON 9.6 million is revolving and may be used by the Borrower to finance the working capital needs. Following a partial reimbursement in 2021, the loan facility balance with Intesa Sanpaolo amounts to 4,039 as at 30 June 2021 (31 December 2020: 9,600).

28

Covenants:

The Group’s borrowing arrangement with the Alpha Bank contains several covenants, mainly of quantitative nature, out of which the most important relates to the ratio bank net debt, including non-cash loan utilized for letter of guarantee / EBITDA at a consolidated level, excluding the impact of IFRS 16, which should not exceed at any point in time 2.5.

Breaches in meeting the financial covenant at Group consolidated level would permit the bank to call the loan amount needed to meet the financial covenant. There have been no breaches of the consolidated financial covenant for the year ended 31 December 2020 as well as for the six-month period ended 30 June 2021.

Breaches in meeting standalone financial covenants allow the bank to cease any loan disbursement to the affected company and to immediately call the loan.

As of 30 June 2021 and 31 December 2020, American Restaurant System recorded a negative net worth, thus failing to meet the general financial terms at standalone level. As a result, American Restaurant System is not allowed to perform any further drawings from the loan. The long-term outstanding balance of ARS bank loans and borrowing of 1,334 is recorded as a current liability as a result of not meet the equity ratio individual contractual conditions.

The Group’s short-term borrowing arrangement with the Intesa Sanpaolo contains several covenants, mainly of quantitative nature, out of which the most important are: the Borrower’s ratio Total financial debt/ EBITDA at individual level should not exceed 4.4 for the year 2020 (condition met as of 30 June 2021 and 31 December 2020) and the amount of loans granted to Sphera Group entities by the Borrower (USFN RO) should not exceed 18 million EUR (condition not met as of 30 June 2021 and 31 December 2020, but waived by the bank in January 2021). Breaches in meeting the financial covenant at individual level would permit the bank to call the loan amount. However, the loan from Intesa Sanpaolo is presented as current liability.

10 ISSUED CAPITAL

30 June 31 December

2021 2020 Authorised shares Ordinary shares of 15 RON each 38,799,340 38,799,340 Share capital (RON thousand) 581,990 581,990

The shareholders of Sphera Franchise Group SA as at 30 June 2021 are: Tatika Investments Ltd. (28.2321%), Computerland Romania SRL (20.5327%), Wellkept Group SA (16.3400%), others (34,8953%). As at 31 December 2020, the shareholders structure was: Tatika Investments Ltd. (28.2320%), Computerland Romania SRL (20.5326%), Wellkept Group SA (16.3400%), Lunic Franchising and Consulting LTD (10.8412%) and others (24.0539%).

At the Ordinary General Shareholders Meeting held on 19 August 2021, the shareholders of Sphera Franchise Group SA approved the distribution of dividends in total amount of 35,001 from the undistributed profit from 2019 and 2020. The gross dividend per share is RON 0.9021 The payment of the dividends will start on 30 September 2021 (please see also Significant events after closing of the reporting period).

11 EBITDA

Six-month period ended 30 June 30 June 2021 2020 Operating profit/(loss) 11,042 (15,810)

Adjustments to bridge operating profit/(loss) to EBITDA: Depreciation, amortization and impairment included in restaurant expenses 44,458 42,063 Depreciation, amortization and impairment included in general and administration expenses 3,027 2,231 EBITDA 58,527 28,483 Non-recurring expenses 734 791 Normalised EBITDA 59,261 29,274

For the six-month period ended 30 June 2021 and 30 June 2020, respectively, EBITDA was normalized to exclude the accrued penalties due to Pizza Hut Europe (Master Franchisor - YUM!) for the restaurants committed to be opened in 2019 and postponed for the future periods (Note 5).

In August 2021, the Group signed a new agreement with YUM! which replaces the former development agreement for the period 2017 -2021. In terms of accrued initial fees for the years 2019 and 2020 related to the previous development plan, as well as accrued penalties for not meeting the minimum target for new Pizza Hut restaurants from 2019, the parties agreed to use these amounts in entirety as a reinvestment credit, which will be deployed into development of the Pizza Hut and Pizza Hut Delivery network in Romania (please see also Significant events after closing of the reporting period).

12 RELATED PARTY DISCLOSURES

During the six-month period ended 30 June 2021 and 30 June 2020 respectively, the Group has carried out transactions with the following related parties:

Country of Related party Nature of the relationship incorporation Nature of transactions Moulin D’Or SRL Entity affiliated to shareholders Romania Sale of goods and of the parent services Midi Development SRL Entity with common members of Romania Services key management personnel Grand Plaza Hotel SA Entity affiliated to a shareholder Romania Rent and utilities store PH of the parent Dorobanti Arggo Software Entity affiliated to a shareholder Romania Implementation services, Development and of the parent IT services Consulting SRL Lunic Franchising and Shareholder Cyprus Payment of dividends Consulting LTD Wellkept Group SA Shareholder Romania Rent training center and payment of dividends Tatika Investments Ltd. Shareholder Cyprus Payment of dividends Computerland Romania Shareholder Romania Payment of dividends SRL Cinnamon Bake&Roll Entity with common members of Romania Sale of goods and SRL key management personnel services, loans provided Lucian Vlad Beneficial owner of Lunic Romania Rent store KFC Mosilor Franchising and Consulting Ltd.

30

Country of Related party Nature of the relationship incorporation Nature of transactions Radu Dimofte Beneficial owner of Wellkept Romania Rent store KFC Mosilor Group SA, Tatika Investments Ltd and ultimate beneficiary owner of the parent Elicom SRL Entity affiliated to a shareholder Romania Call-centre services of the parent Elicom Connect SRL Entity affiliated to a shareholder Romania Marketing services of the parent Dorobanti 239 Imobiliare Entity affiliated to a shareholder Romania Rent and utilities for SRL of the parent restaurant and administrative area Baneasa Developments Entity affiliated to a shareholder Romania Restaurant rent SRL of the parent Baneasa Investments SA Entity affiliated to a shareholder Romania Restaurant rent of the parent Fundatia Advance Entity with common members of Romania Sale of goods key management personnel

The following table provides the total amount of transactions that have been entered into with related parties for the relevant period: Transactions during the six- Balances as at month period ended 30 June 2021 30 June 2021 Sales to Purchases Amounts Amounts related from related owed by owed to parties parties related parties related parties

Cinnamon Bake&Roll SRL - 2 79 - Moulin D'Or SRL - 13 - - Lucian Vlad - 129 - - Radu Dimofte - 54 - - Wellkept Group SA - 240 - 1 Midi Development SRL 1 - - - Grand Plaza Hotel SA - 363 66 17 Arggo Software Development and - 75 - 888 Consulting SRL Elicom SRL - 364 - 102 Elicom Connect SRL - 6 - 3 Dorobanti 239 Imobiliare SRL - 1,575 5 - Baneasa Developments SRL - 1,569 - 277 Baneasa Investments SA - 306 128 23 Computerland Romania SRL - - - - Fundatia Advance 73 - - - 74 5,509 278 498

31

Transactions during the six- Balances as at month period ended 31 December 2020 30 June 2020 Sales to Purchases Amounts Amounts related from related owed by owed to parties parties related parties related parties

Cinnamon Bake&Roll SRL - 7 110 - Moulin D'Or SRL 163 3 - - Lucian Vlad - 109 - - Radu Dimofte - 45 - - Wellkept Group SA - 194 - 1 Midi Development SRL 7 - - - Grand Plaza Hotel SA - 258 66 19 Arggo Software Development and - 391 - 279 Consulting SRL Elicom SRL - 648 - 85 Elicom Connect SRL - 5 - 2 Dorobanti 239 Imobiliare SRL - 1,177 - 37 Baneasa Developments SRL - 1,489 - 157 Baneasa Investments SA - 187 128 57 Fundatia Advance - - 35 - 170 4,513 339 637

The Group has granted a loan to Cinnamon Bake&Roll SRL. The loan balance as at 30 June 2021 was of 643 (31 December 2020: 639) and the interest accrual as at 30 June 2021 was of 66 (31 December 2020: 61).

Terms and conditions of transactions with related parties

The sales to and purchases from related parties are made at terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the period end are unsecured, interest free and settled in cash. There have been no guarantees provided or received for any related party receivables or payables. For the six months period ended 30 June 2021 and for similar period of the year 2020, the Group has not recorded any impairment of receivables relating to amounts owed by related parties. This assessment is undertaken each financial year by examining the financial position of the related party and the market in which the related party operates.

Compensation of key management personnel of the Group:

Six months ended 30 June 30 June 2021 2020

Short-term employee benefits 4,971 5,191 Total compensation of the key management personnel 4,971 5,191

The amounts disclosed in the table are the amounts recognized as an expense during each reporting period.

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13 SEGMENT INFORMATION

For management purposes, the Group is organised into business units based on the restaurants’ brands, as follows: - KFC restaurants - Pizza Hut restaurants - Taco Bell restaurants

The Group has also one more immaterial operating segment, being one Paul restaurant, which is managed by USFN.

Inter-segment revenues are presented in the “Inter-segment revenues” line and eliminated during consolidation. The Group’s service revenues resulting from the contracts signed with other related parties are presented in the “Other” category (166 for the six-month period ended 30 June 2020).

The Board of Directors monitors the operating results of the operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on segment operating profit and is measured consistently with ‘’Restaurant operating profit’’ in the statement of comprehensive income in the consolidated financial statements.

Six-month period ended 30 June 2021 KFC Pizza Hut Taco Bell Other Eliminations Consolidated

Revenues from external customers 383,954 38,609 21,980 - - 444,544 Inter-segment revenues - - - 14,983 (14,983) - Dividend revenues - - - 37,525 (37,525) - Operating expenses 365,675 44,227 22,908 15,612 (14,920) 433,502

Segment operating profit/(loss) 18,279 (5,618) (928) 36,896 (37,588) 11,042

Finance costs 8,252 1,187 1,088 1,110 (1,634) 10,002 Finance income 1,051 5 - 621 (1,634) 42 Income taxes 673 340 96 (113) - 996

Net profit/(loss) 10,404 (7,140) (2,112) 36,520 (37,588) 85

Total assets 554,202 56,071 34,914 167,897 (138,536) 674,548 Total liabilities 534,489 67,310 48,543 64,877 (189,454) 525,765

33

Six-month period ended 30 June 2020 KFC Pizza Hut Taco Bell Other Eliminations Consolidated

Revenues from external customers 255,557 36,848 12,008 166 - 304,580 Inter-segment Revenues - - - 12,133 (12,133) - Operating expenses 258,548 45,154 13,935 14,847 (12,094) 320,390

Segment operating profit (2,991) (8,306) (1,927) (2,548) (39) (15,811)

Finance costs 7,753 1,085 1,085 873 (1,492) 9,303 Finance income 571 9 - 1,000 (1,492) 88 Income taxes 692 362 67 192 - 1,313

Net profit/(loss) (10,865) (9,745) (3,078) (2,613) (39) (26,339)

Total assets 30 June 2020 505,517 70,073 37,550 79,788 (62,037) 630,891 Total liabilities 30 June 2020 421,329 74,285 47,924 63,127 (108,086) 498,578

Total assets 31 December 2020 553,806 62,231 35,368 129,046 (113,179) 667,275 Total liabilities 31 December 2020 506,559 66,331 46,886 62,549 (164,172) 518,154

Geographic information:

Six-month period ended 30 June 30 June Revenue from external customers 2021 2020

Romania 394,769 270,585 Italy 44,161 30,640 Republic of Moldova 5,614 3,354 Total restaurant revenue 444,544 304,580

The revenue information above is based on the location of the customers.

Bucharest, 31 August 2021

Chief Executive Officer Chief Financial Officer

Calin Ionescu Valentin Budes

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INTERIM CONDENSED SEPARATE FINANCIAL STATEMENTS AS OF AND FOR SIX-MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED)

Prepared in accordance with Order of the Ministry of Public Finance no. 2844/2016 approving the accounting regulations compliant with the International Financial Reporting Standards. The interim condensed separate financial statements are unaudited.

35

SPHERA FRANCHISE GROUP SA INTERIM CONDENSED SEPARATE FINANCIAL STATEMENTS (UNAUDITED) Prepared in accordance with Order of the Ministry of Public Finance no. 2844/2016 30 June 2021 All amounts in RON thousand, unless specified otherwise

INTERIM CONDENSED SEPARATE STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED)

Six-month period endedN Note 30 June 2021 30 June 2020

Revenues Dividend revenues 7 37,525 - Revenue from service contracts 7 14,983 12,299

Total revenues 52,509 12,299

Expenses Payroll and employee benefits* 12,986 11,117 Other expenses 3 2,627 3,730 Total expenses 15,612 14,847

Operating profit/(loss) 36,896 (2,548)

Finance costs 1,110 873 Finance income 621 1,000

Profit/(Loss) before tax 36,407 (2,421) Income tax (113) 192 Profit/(Loss) for the period 36,520 (2,613)

Total comprehensive income for the period, net of tax 36,520 (2,613)

* For the six-month period ended 30 June 2020, payroll and employee benefits include the amount of 443 representing technical unemployment indemnity recovered by the Company as part of the supportive measures for the employee-related costs granted by the Romanian Government to the companies affected by a temporary reduction and/or interruption of activity due to COVID-19 pandemic.

36 SPHERA FRANCHISE GROUP SA INTERIM CONDENSED SEPARATE FINANCIAL STATEMENTS (UNAUDITED) Prepared in accordance with Order of the Ministry of Public Finance no. 2844/2016 30 June 2021 All amounts in RON thousand, unless specified otherwise

INTERIM CONDENSED SEPARATE STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2021 (UNAUDITED)

30 June 31 December 2021 2020 Assets Non-current assets 631,207 631,432 Property, plant and equipment 2,324 2,342 Right-of-use assets 4,567 4,959 Intangible assets 125 170 Investments in subsidiaries 615,854 615,854 Trade and other receivables 7,143 7,025 Deferred tax assets 1,195 1,082

Current assets 152,548 113,470 Inventories - Trade and other receivables 129,922 108,373 Prepayments 225 214 Cash and short-term deposits 22,400 4,883

Total assets 783,755 744,902

Equity and liabilities Equity Issued capital 581,990 581,990 Legal reserve 6,921 6,922 Retained earnings 129,962 93,442 Total equity 718,874 682,354

Non-current liabilities 49,327 46,870 Interest-bearing loans and borrowings (Note 5) 45,361 42,570 Lease liabilities 3,966 4,300

Current liabilities 15,554 15,678 Interest-bearing loans and borrowings (Note 5) 1,947 3,849 Lease liabilities 1,029 1,027 Trade and other payables 12,578 10,802

Total liabilities 64,881 62,548 Total equity and liabilities 783,755 744,902

37

SPHERA FRANCHISE GROUP SA INTERIM CONDENSED SEPARATE FINANCIAL STATEMENTS (UNAUDITED) Prepared in accordance with Order of the Ministry of Public Finance no. 2844/2016 30 June 2021 All amounts in RON thousand, unless specified otherwise

INTERIM CONDENSED SEPARATE STATEMENT OF CHANGES IN EQUITY FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED)

Issued Legal Retained Total

capital reserves earnings equity

As at 1 January 2021 581,990 6,921 93,443 682,354

Profit for the period - - 36,520 36,520 Total comprehensive income - - 36,520 36,520

As at 30 June 2021 581,990 6,921 129,963 718,874

Issued Legal Retained Total

capital Reserves earnings equity

As at 1 January 2020 581,990 3,607 44,061 629,658

Loss for the period - - (2,613) (2,613) Total comprehensive income - - (2,613) (2,613)

Dividends (13,679) (13,679) As at 30 June 2020 581,990 3,607 27,768 613,365

38

SPHERA FRANCHISE GROUP SA INTERIM CONDENSED SEPARATE FINANCIAL STATEMENTS (UNAUDITED) Prepared in accordance with Order of the Ministry of Public Finance no. 2844/2016 30 June 2021 All amounts in RON thousand, unless specified otherwise

INTERIM CONDENSED SEPARATE STATEMENT OF CASH FLOWS FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED)

Six-month period ended 30 June 2021 30 June 2020 Operating activities

Profit/(loss) before tax 36,407 (2,421) Adjustments to reconcile profit/(loss) before tax to net cash flows: Dividend revenue (37,525) - Depreciation and amortization of property, plant and equipment, right-of-use and intangible assets 860 915 Rent concessions (discounts) (80) Net foreign exchange differences 128 145 Finance income (621) (1,000) Finance costs (interest) 966 817

Working capital adjustments: Decrease in trade and other receivables, small inventories and prepayments (4,267) (4,937) Increase/(Decrease) in trade and other payables 1,791 3,277

Dividends received 36,862 - Interest received 19 - Interest paid (375) (388)

Net cash flows from operating activities 34,245 (3,672)

Investing activities

Purchase of right of use assets 169 - Purchase of property, plant and equipment and intangible assets (423) (228) Loans to related parties (15,929) (3,452) Net cash flows used in investing activities (16,183) (3,681)

Financing activities

Proceeds from borrowings - 6,000 Repayment of borrowings - (1,267) Payment of lease liabilities (546) (488) Dividends paid - (13,687)

Net cash flows used in financing activities (546) (9,442)

Net increase in cash and cash equivalents 17,516 (16,796) Cash and cash equivalents at 01 January 4,883 19,233

Cash and cash equivalents at 30 June 22,400 2,437

39

SPHERA FRANCHISE GROUP SA INTERIM CONDENSED SEPARATE FINANCIAL STATEMENTS (UNAUDITED) Prepared in accordance with Order of the Ministry of Public Finance no. 2844/2016 30 June 2021 All amounts in RON thousand, unless specified otherwise

NOTES TO THE INTERIM SEPARATE FINANCIAL STATEMENTS AS AT AND FOR THE SIX- MONTH PERIOD ENDED 30 JUNE 2021 (UNAUDITED)

14 REPORTING ENTITY

These interim condensed separate financial statements are prepared by Sphera Franchise Group SA. Sphera Franchise Group SA (‘’Sphera’’ or “the Company”) was incorporated on 16 May 2017 as a joint stock company and is registered at No. 239 Calea Dorobanti, Bucharest, Romania. The Company renders management and support services such as marketing, project management and store network development, sales support, human resources and other services to its subsidiaries. Sphera Franchise Group SA is listed on Bucharest Stock Exchange under the symbol “SFG”. Sphera Franchise Group SA together with its subsidiaries are referred hereinafter as ‘’SFG’’ or ‘’the Group’’. The Group operates quick service and takeaway restaurant concepts (a chain of 109 restaurants) under the Kentucky Fried Chicken (‘’KFC’’), spread across Romania as well as in the Republic of Moldova and in Italy. The Group also operates a chain of pizza restaurants (21 restaurants as at 30 June 2021) as well as pizza delivery points (18 locations as at 30 June 2021) under the Pizza Hut (“PH”) and Pizza Hut Delivery (“PHD”) brands, spread across Romania, one chain of restaurants under the “Taco Bell” brand (12 restaurants as at 30 June 2021) and one restaurant under Paul brand, in Romania.

15 BASIS OF PREPARATION OF THE INTERIM CONDENSED SEPARATE FINANCIAL STATEMENTS

The interim condensed separate unaudited financial statements of Sphera Franchise Group SA as of and for the six-month period ended 30 June 2021 have been prepared in accordance with IAS 34 Interim Financial Reporting.

The interim condensed separate financial statements have been prepared on a historical cost basis and are presented in Romanian Lei (‘’RON’’). All values are rounded to the nearest thousand RON, except when otherwise indicated; accordingly, there may be rounding differences.

The interim condensed separate financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Company’s annual separate financial statements as at 31 December 2020.

The interim condensed separate financial statements for six-month period ended 30 June 2021 included in this report are unaudited.

General accounting policies

The accounting policies and valuation methods adopted in the preparation of the interim condensed separate financial statements are consistent with those followed in the preparation of the Company’s annual separate financial statements for the year ended 31 December 2020. The amendments to IFRS effective since 1 January 2021 do not have a material effect on the Company’s interim condensed separate financial statements. The Company has not early adopted any other standards, interpretations or amendments that have been issued but are not yet effective.

40

SPHERA FRANCHISE GROUP SA INTERIM CONDENSED SEPARATE FINANCIAL STATEMENTS (UNAUDITED) Prepared in accordance with Order of the Ministry of Public Finance no. 2844/2016 30 June 2021 All amounts in RON thousand, unless specified otherwise

Foreign currencies The exchange rate RON – EUR as at 30 June 2021 and 31 December 2020 were:

30 June 31 December 2021 2020

RON – EUR 4.9267 4.8694 RON – USD 4.1425 3.9660

16 OTHER EXPENSES

Six-month period ended 30 June 2021 30 June 2020

Third-party expenses 1,020 1,183 Advertising and sponsorship** 31 934 Depreciation and amortization 860 915 Travel expenses 138 187 Office supplies 119 126 Insurance 149 135 Other taxes 118 91 Rent*** 45 (1) Banking charges 29 24 Maintenance & Repairs 57 53 Utilities 20 26 Miscellaneous expenses 41 57 Total other expenses 2,627 3,730 **For the six-month period ended 30 June 2020, include the value of sponsorship of 484 granted to Romania Red Cross organisation for acquiring medical equipment *** For the six-month period ended 30 June 2020, the rent expenses include the impact of rent discounts of 80 related to the COVID-19 pandemic, recognised in accordance with requirements of the amendment to IFRS 16 Leases, Covid-19-Related Rent Concessions

41

SPHERA FRANCHISE GROUP SA INTERIM CONDENSED SEPARATE FINANCIAL STATEMENTS (UNAUDITED) Prepared in accordance with Order of the Ministry of Public Finance no. 2844/2016 30 June 2021 All amounts in RON thousand, unless specified otherwise

17 INVESTMENTS IN SUBSIDIARIES

Details of the carrying value of investments in subsidiaries as of 30 June 2021 and 31 December 2020, respectively are as follows: Share Country of Field of interest Carrying Company name incorporation Activity percent value

US Food Network SA Romania Restaurants 99.9997% 519,704 American Restaurant Romania Restaurants System SA 99.9997% 37,898 California Fresh Flavors Romania Restaurants SRL 99.9900% 100 US Food Network SRL Moldova Restaurants 80.0000% 1,735 US Food Network SRL Italy Restaurants 100.0000% 56,417 Total 615,854

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SPHERA FRANCHISE GROUP SA INTERIM CONDENSED SEPARATE FINANCIAL STATEMENTS Prepared in accordance with Order of the Ministry of Public Finance no. 2844/2016 30 June 2021 All amounts in RON thousand, unless specified otherwise

18 INTEREST-BEARING LOANS AND BORROWINGS

Interest rate, % Maturity 30 June 2021 31 December 2020

Current interest-bearing loans and borrowings EURIBOR 3M + relevant 6 years from each withdrawal Bank loan spread 1,947 3,849

Total current interest-bearing loans and borrowings 1,947 3,849

Non-current interest-bearing loans and borrowings Bank loan EURIBOR 3M + relevant 6 years from each withdrawal spread 13,541 11,459 Loan from related parties (including accrued interest) Within 5 years from contract (Note 7) 4% fixed interest rate signing date 31,820 31,111 Total non-current interest-bearing loans and Borrowings 45,361 42,570

Total interest-bearing loans and borrowings 47,308 46,419

The Company has received a multicurrency credit facility from its subsidiary US FOOD NETWORK SA, the maximum limit being 20 million EUR. The loan agreement contains no covenants or other special terms. The Company is part of a credit facility from Alpha Bank Romania signed jointly by the Company and its Romanian subsidiaries. The loan is secured with pledge on current accounts opened with the bank, promissory notes issued, pledge on receivables from and shares owned by the Company in its Moldova and Italia subsidiary as well as on future dividends from these subsidiaries.

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SPHERA FRANCHISE GROUP SA INTERIM CONDENSED SEPARATE FINANCIAL STATEMENTS (UNAUDITED) Prepared in accordance with Order of the Ministry of Public Finance no. 2844/2016 30 June 2021 All amounts in RON thousand, unless specified otherwise

As a result of a request made to Alpha Bank Romania by the Borrowers (the Company together with its subsidiaries) on the base of Emergency Ordinance 37/2020, the parties agreed by an addendum to loan contract to suspend temporarily all loan principal payments due by the Borrowers until 31 December 2021. All principal amounts initially due during suspension period will be paid beginning 1 January 2022 and loan maturities will be postponed in accordance. Interest payments are not suspended.

Starting with 29 May 2020, Sphera entered in a short-term borrowing arrangement with Vista Bank Romania. In 2021, the credit facility was extended for another 12 months, until 22 May 2022. The credit facility is revolving and may be used by the Borrower for financing of working capital needs and of generic company costs, as well as intragroup loans.

19 ISSUED CAPITAL

30 June 31 December

2021 2020 Authorised shares Ordinary shares of 15 RON each 38,799,340 38,799,340 Share capital (RON thousand) 581,990 581,990

The shareholders of Sphera Franchise Group SA as at 30 June 2021 are: Tatika Investments Ltd. (28.2321%), Computerland Romania SRL (20.5327%), Wellkept Group SA (16.3400%), others (34,8953%). As at 31 December 2020, the shareholders structure was: Tatika Investments Ltd. (28.2320%), Computerland Romania SRL (20.5326%), Wellkept Group SA (16.3400%), Lunic Franchising and Consulting LTD (10.8412%) and others (24.0539%). At the Ordinary General Shareholders Meeting held on 19 August 2021, the shareholders of Sphera Franchise Group SA approved the distribution of dividends in total amount of 35,001 from the undistributed profit from 2019 and 2020. The gross dividend per share is RON 0.9021 The payment of the dividends will start on 30 September 2021 (please see Events after closing of the reporting period).

20 RELATED PARTY DISCLOSURES

During the six-month period ended 30 June 2021 and 30 June 2020 respectively, the Company has carried out transactions with the following related parties:

Nature of the Country of Related party relationship incorporation Nature of transactions

Dividends, loan received, sale of services, acquisition of goods and US Food Network SA Subsidiary Romania services Sale of services, loan provided, acquisition of goods and services, VAT American Restaurant System SA Subsidiary Romania tax group Loan provided, sale of California Fresh Flavors SRL Subsidiary Romania services Republic of US Food Network SRL Subsidiary Moldova Dividends Loan provided, sale of US Food Network SRL Subsidiary Italy services Entity with several common members of key management Cinnamon Bake&Roll SRL personnel Romania Acquisition of goods Entity with several Midi Development SRL common members Romania Services 44

of key management personnel Entity affiliated to shareholders of the Sale of services, Moulin D'Or SRL parent Romania acquisition of goods Rent training center Wellkept Group SA Shareholder Romania Dividends Lunic Franchising and Consulting Ltd. Shareholder Cyprus Dividends Computerland Romania SRL Shareholder Romania Dividends Grand Plaza Hotel SA Entity affiliated to a Romania Acquisition of goods and shareholder of the services parent Baneasa Developments SRL Entity affiliated to a Romania Acquisition of goods and shareholder of the services parent

The following table provides the total amount of transactions that have been entered into with related parties for the relevant period:

Six-month period ended 30 June 2021 30 June 2021

Amounts Amounts Dividends owed by owed to Related party Sales Purchases revenues related related parties parties US Food Network SA 36,300 11,616 3 85,372 - US Food Network SRL

(Republic of Moldova) 1,225 - - 699 - American Restaurant System

SA - 2,063 5 3,761 3,546 California Fresh Flavors SRL - 789 - 1,382 - US Food Network SRL (Italy) - 515 - 1,691 - Moulin D'Or SRL - - 1 - - Midi Development SRL - - - - - Wellkept Group SA - - 240 - 1 Grand Plaza Hotel SA - - 2 - - Baneasa Developments SRL - - - Arggo Software Development

and Consulting SRL - - 84 - - Loans and interest from related

parties - - - - 31,820 Loans and interest to related

parties (please see below) - - - 42,870 -

Total 37,525 14,983 335 135,773 35,368

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Six-month period ended 31 December 2020 30 June 2020

Amounts Amounts Dividends owed by owed to Related party Sales Purchases revenues related related parties parties US Food Network SA - 8,765 3 83,540 - US Food Network SRL - - (Republic of Moldova) - - - American Restaurant System 1,309 2,650 SA - 2,100 5 California Fresh Flavors SRL - 588 - 450 - US Food Network SRL (Italy) - 680 - 1,159 - Moulin D'Or SRL - 160 3 - - Midi Development SRL - 6 - - - Wellkept Group SA - - 194 - 1 Grand Plaza Hotel SA - - 4 - - Baneasa Developments SRL 2 - - Arggo Software Development and Consulting SRL - - 92 - 37 Loans and interest from related parties - - 399 - 31,111 Loans and interest to related parties (please see below) - - - 26,121 - Total - 12,299 701 112,579 33,800

Interest income and interest expense and related accrued balances as well as the balances of the intercompany loan receivables and payables are presented below: Six-month period ended 30 June 2021 30 June 2021 Related party Interest expense Interest payable Loan payable US Food Network SA 591 3,175 28,646 Total 591 3,175 28,646

Interest income Interest receivable Loan receivable California Fresh Flavors SRL 176 920 8,475 US Food Network SRL (Italy) 246 2,528 20,824 American Restaurant System SA 179 2,239 7,883 Total 602 5,687 37,182

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Six-month period ended 31 December 2020 30 June 2020 Related party Interest expense Interest payable Loan payable US Food Network SA 399 2,552 28,560 Total 399 2,552 28,560

Interest income Interest receivable Loan receivable California Fresh Flavors SRL 195 735 8,458 US Food Network SRL (Italy) 680 2,254 4,757 American Restaurant System SA 371 2,035 7,883 Total 1,245 5,024 21,097

One of the intercompany loans granted in September 2017 by the Company to California Fresh Flavors is payable within a period of one to five years from the contract date (principal due of 6,178) and the other one is due within 12 months from the contract signing date, December 2019, with renewal option. In December 2020, the short-term loan agreement was extended until December 2021. The loans granted to US Food Network Srl (Italy) and American Restaurant System SA are payable within one-year period, with renewal option. Terms and conditions of transactions with related parties The sales to and purchases from related parties are made at terms equivalent to those that prevail in arm’s length transactions. Outstanding trade balances at the period end are unsecured, interest free and settled in cash. There have been no guarantees provided or received for any related party receivables or payables. Compensation of key management personnel of the Company: Six-month period ended 30 June 2021 30 June 2020 Short-term employee benefits 3,733 4,320 Total compensation paid to key management personnel 3,733 4,320

The amounts disclosed in the table are the amounts recognised as an expense during each reporting period.

Bucharest, 31 August 2021

Chief Executive Officer Chief Financial Officer Calin Ionescu Valentin Budes

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